Did a powdered product intended to be mixed with liquid qualify for Illinois' 1% state food tax rate?

Plain-English summary

A seller asked whether a powdered product intended to be mixed with liquid qualified as food taxed at Illinois' reduced 1% state rate.

IDOR said the product appeared to qualify based on the limited information supplied. Beverage powders and dry mixes were not "soft drinks," and the product was not prepared for immediate consumption.

The GIL explained that off-premises food generally received the 1% state rate plus applicable local taxes, while alcoholic beverages, candy, soft drinks, and immediately consumable prepared food received the 6.25% general-merchandise state rate plus local taxes. It also warned that the nature of the selling establishment could affect the result.

What this means for you

Powder mixed by the customer is not automatically a taxable soft drink. Product form, ingredients, immediate-consumption status, and the seller's establishment all matter. This GIL said the particular powder only "appears" to qualify because IDOR lacked fuller product information.

Common questions

Was the powder a soft drink? No.

Did IDOR definitively bind itself to the 1% rate? No. This was a GIL based on limited facts.

Citations and references

• 86 Ill. Adm. Code 130.310(b) and (d)(6)(E)(i).

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2015.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2015/st-15-0067-gil.pdf

Original ruling text

ST 15-0067 GIL 10/16/2015 FOOD

This letter discusses the State tax rate applicable to sales of food. See 86 Ill. Adm. Code
130.310. (This is a GIL.)

October 16, 2015

Dear XXxXxx:

This letter is in response to your letter received September 21, 2015, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”’)
are issued by the Department in response to specific taxpayer inquiries concerning the
application of a tax statute or rule to a particular fact situation. A PLR is binding on the
Department, but only as to the taxpayer who is the subject of the request for ruling and only to
the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs must
comply with the procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code
1200.110. The purpose of a General Information Letter (“GIL”) is to direct taxpayers to
Department regulations or other sources of information regarding the topic about which they
have inquired. A GIL is not a statement of Department policy and is not binding on the
Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant
to your inquiry.

The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:

We are writing to request a private letter ruling to find out if a product we sell
ABC qualifies as a food and should be taxed at the 1% food rate. Included with
this is a print out of our product packaging/ingredient. If the type is too small or
you need any additional information please contact me.

DEPARTMENT?’S RESPONSE:

Please see the Department’s Regulation entitled “Food, Soft Drinks and Candy” at 86 III.
Adm. Code 130.310 which can be found on the Department’s website. As you can see in the
regulation, food that is to be consumed off the premises where it is sold (other than alcoholic
beverages, candy, soft drinks, and food that has been prepared for immediate consumption) is
taxed at the lower state tax rate of 1% plus applicable local taxes. In contrast, alcoholic
beverages, candy, soft drinks and food that has been prepared for immediate consumption are
taxed at the higher State sales tax rate of 6.25% plus applicable local taxes.

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The regulation defines food as any solid, liquid, powder or item intended by the seller
primarily for human internal consumption, whether simple, compound or mixed, including foods
such as condiments, spices, seasonings, vitamins, bottled water and ice.

Beginning September 1, 2009, "soft drinks" mean non-alcoholic beverages that contain
natural or artificial sweeteners; but "soft drinks" do not include beverages that contain milk or
milk products, soy, rice or similar milk substitutes, or greater than 50% of vegetable or fruit juice
by volume. Thus, if a beverage contains a natural or artificial sweetener but also contains milk
or milk products, soy, rice or similar milk substitutes, or greater than 50% of vegetable or fruit
juice by volume, it would not fall within the definition of “soft drink” but, rather, it would fall
within the definition of food.

Also beginning September 1, 2009, all candy became taxable at the State 6.25% general
merchandise rate. Candy is defined as a preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the
form of bars, drops, or pieces. Candy does not include any preparation that contains flour or
requires refrigeration. Thus, if a product contains flour or requires refrigeration, it would not be
considered “candy” even if it meets all the other elements of the definition. Because the
definition of candy changed in September 1, 2009, the tax treatment of certain products went
from the low 1% rate to the State 6.25% general merchandise rate.

We cannot provide a specific answer without more information about the product. Please
be aware that the tax can also be impacted by the nature of your selling establishment. Please
see 86 Ill. Adm. Code 130.310(b). However, it appears that the product is a powder which is
intended to be mixed with liquid. Beverage powders and dry mixes are not considered soft
drinks. See 86 Ill. Adm. Code 130.310(d)(6)(E)(i). Therefore this product is not a soft drink.
This product is also not for immediate consumption. Based on this information, it appears that
this product qualifies for the lower 1% rate of tax on food.

I hope this information is helpful. If you require additional information, please visit our

website at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at
(217) 782-3336.

Very truly yours,

Cara Bishop
Associate Counsel

CB:mdb

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